Administering Special Needs Trusts

By James O’Brien Law Office of James O’Brien

Many families seek to protect the resources of a loved one with special needs through the creation of a Special Needs Trust (SNT). A properly drafted SNT allows the beneficiary to avoid wealth depletion through access to free and low cost state services, including Medi-Cal. However, a trust client should be apprized that even if there is a SNT in place, under certain circumstances, the state may seek repayment for services from a special needs person’s relatives, as well as from the estate of a special needs person after his or her death.

State statutes permit the state to seek reimbursement from a special needs person’s family members under certain circumstances for costs attributable to that person’s care. If a child’s parent dies when the child is confined to a state institution, the county or state may seek reimbursement from the parent’s estate for the services rendered to the child. Similarly, parents of minor children or dependent children under the age of 21 are responsible for virtually all Medi-Cal health care costs.

After a Medi-Cal beneficiary’s death, the state may pursue a claim against a person’s estate if the person was 55 years of age or older at the time he or she received Medi-Cal benefits. The state may seek Medi-Cal reimbursement from a person of any age who received nursing home care, unless that person leaves a surviving spouse, registered domestic partner, or a blind, disabled or minor child.

The state may pursue this Medi-Cal repayment from a Special Needs Living Trust property, as long as the property is in the name of the decedent at time of death, unless the trust beneficiary is a surviving spouse or registered domestic partner. In the case of a surviving spouse or registered domestic partner, Medi-Cal can recover its costs from his or her estate after their death.

A well drafted SNT allows a person with special needs to protect assets and facilitate an enriched life style. It is nonetheless important to explain limitations such as these to a trust client to prepare him or her for a realistic allocation of resources.

James O’Brien specializes in estate planning and probate distribution. Within his practice he has developed an expertise in first and third party Special Needs Trusts. His education includes a JD, MBA and LLM in taxation, with an emphasis in estate planning. He is admitted to the California and Oregon state bars.

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